More than 37,000 bankruptcies filed in Genesee County in past decade but numbers on decline

There have been more than 37,000 bankruptcies filed in Genesee County this past decade, according to federal court data.File

FLINT, MI -- Dennis Hoffman was over his head in debt when he made the decision to file Chapter 13 bankruptcy in 2007.

Hoffman, 41, of Davison, said he was
caught up in the glut of available credit offered to him and spent more
than he could pay back.

"We weren't thinking wisely," said Hoffman.

But he wasn't alone.

There have been 37,053 bankruptcies filed in Genesee County over the
past decade -- the bulk of which were filed
to shed personal debt.

Those numbers, however, have taken a downturn in recent years.

After a surge from 2008 to 2011 that included a mid-recession high 4,235 bankruptcy filings from March 2009 to March 2010, the number of new filings has gradually decreased to
just 3,279 in a 12-month period from March 2012 to March 2013.

In all, there were more than 12,000 total new filings from March 2008 to March 2011.

“2009
was just an unbelievable year,” said Flint bankruptcy attorney
Lynnmarie Johnson. “You could work 24 hours, around the clock, if you
wanted to.”

Business bankruptcies accounted for only 597 -- or only 1.6 percent
-- of the new filings over the past decade in Genesee County, according
to the data. Nationally, businesses accounted for 2-4 percent annually
of all new bankruptcy filings over the same time frame.

“The
bankruptcies were during the worst part of the economy,” said Chris
Douglas, an associate economics professor at University of
Michigan-Flint. “They’ve gradually decreased.”

Douglas said he
believes that many of the new bankruptcy filings revolve around job
losses and as the economy began to rebound in Genesee County the
bankruptcy filings tapered off.

“I think there’s a small upswing,”
Douglas said of Genesee County’s economy, adding that there has been
about 2 percent economic growth being driven by strong retail sales.

Michael
Molitor, a professor at Lansing-based Cooley Law School, agreed that a
rebounding economy is responsible for a decline in new filings.

“The
decline in filings recently is mainly due to economic reasons,” said
Molitor. “The economy is not booming but things are at least stabilized
and slowly getting better.”

But Johnson said she isn’t so quick to say an improving economy is responsible for a decline in bankruptcy filings.

“I
don’t think we’re seeing a downward trend because things are better for
people,” said Johnson. “The people who needed to file -- who had to
file -- filed when the economy first tanked.”

Johnson said the
pool of people looking to file bankruptcies has been diminished because
so many people filed during the worst part of the economic downturn.

Flint
attorney Erwin F. Meiers III agreed, saying that some people have given
up hope and abandoned their homes in Genesee County or picked up and
moved to other counties where they filed bankruptcy.

The decade high for new bankruptcy filings came from March 2005 to March 2006 when there were
4,906 new bankruptcy filings following more stringent rule changes.

People rushed to file before
the new law took effect -- a surge that was also experienced nationally
when 1.79 million new bankruptcies were filed compared to only 1.59
million the year before.

New filings in Genesee County dropped to
just 2,481 the following year -- the smallest amount over the past
decade.

The type of people filing new bankruptcies has also changed as the rate of new filings has decreased, according to Johnson.

Johnson
said gone are the days of people finding themselves in bankruptcy
because of exorbitant spending on lavish items or those unable to meet
their obligations despite having relative high salaries.

Those
filers have been replaced by people who managed to hold off filing
bankruptcy during the recession by drawing on retirement accounts until
they were drained and people whose homes are worth far less than they
owe on them.

“I think most folks are not irresponsible,” said
Peter Mooney, a bankruptcy attorney at Mundy Township’s Simen, Figura
and Parker law firm. “They’re victims of the economy.”

Mooney
said people were once able to refinance their homes to give them the
added economic flexibility to avoid bankruptcy but now they are forced
into filing because their homes are underwater.

Meiers said most
of his clients file after losing their jobs, falling behind on second
mortgages or struggling with high medical bills. He said he’s also seen a
surge of elderly filers who found themselves in trouble after
mortgaging their children’s future by co-signing for cars and student
loans.

Mooney, who handles business as well as personal
bankruptcies, said apart from individuals it was mainly small businesses
that were forced into bankruptcy despite a rash of high-profile
bankruptcies by large corporations like General Motors.

He pointed to the construction and building industry being hit exceptionally hard after the housing bubble burst.

Barry
Simon, the former executive director of the Builders and Remodelers of
Mid-Michigan, said 2010-2011 was exceptionally hard for builders. Nearly
30 percent of the businesses that filed bankruptcy in Genesee County
did so between March 2009 and March 2011, according to federal
bankruptcy data.

“The worst has been gone,” Simon said, noting that the housing market has stabilized.

Simon
said that many of the bankruptcies included businesses that had large
swaths of land and vacant lots that were expensive to purchase
originally but were heavily devalued during the recession.

Despite
the housing market bottoming out, very few new homes are being built. That has forced builders to look for new sources of revenue, such as
remodeling existing homes.

“Those that are left have changed their businesses dramatically,” said Simon. “It’s not even remotely the same industry.”

But
the impact bankruptcy has had on local commerce isn’t limited to just
those companies and individuals that have had to file. Businesses that
rely on consumer credit for customers to purchase high-priced items,
such as car dealerships, have also experienced the impact of the glut of
bankruptcy filings.

Dennis Anderson, finance manager for Flint’s
Applegate Chevrolet, said he deals with customers that have gone
through bankruptcies “all the time.”

“It’s a whole new ball game,”
Anderson said when it comes to dealing with customers that have damaged
credit. “It you get the stars aligned right you can get them
financing.”

Customers going through bankruptcy are required to
get approval from a judge prior to being able to take on new debt, such
as the purchase of a new car, Anderson said.

But, even if the
judge writes off on the financing and Anderson can find an institution
willing to lend, the interest on the loan is often astronomical compared
to what people with outstanding credit pay.

Anderson said
bankruptcy customers often pay as high as 24.99 percent interest -- just
less than the state’s maximum allowable interest rate of 25 percent.
Comparatively, Anderson said he has been able to secure loans with
interest rates of roughly 2 percent for people with top-notch credit
ratings.

Nate Warsaw, a financing manager at Birch Run’s Suski
Chevrolet Buick, said he is often able to secure the best interest rates
for bankruptcy customers by going through credit unions where some
bankruptcy trustees have programs set up that allow customers to get
10-11 percent interest rates.

But Warsaw added that it’s not
always in the person’s best interest to rush into a new high-priced
purchase even if they were able to rehabilitate their credit and obtain a
better credit score.

“Learn to crawl before you walk again,” said Warsaw.

But,
Anderson said he doesn’t see much of a change coming after so many
people in the area filed bankruptcy or struggle with poor credit.

“Since 2008, it’s gotten worse all the time,” said Anderson. “I sure would like it to change.”

Hoffman
said he struggled to pay his bills for three years. He even turned to
his family to borrow money but eventually realized that he wasn't going
to be able to dig out of his hole on his own.

Eventually, he
decided to file bankruptcy. Hoffman's bankruptcy was just discharged
earlier this year after he was able to pay back all of his creditors in
full.

"It was a big relief off our chest," Hoffman said. "I wish I would have did it sooner."

Hoffman said he is just starting to rebuild his credit and is nervous about making any major purchases.

Despite
the nerves, Hoffman said he would recommend the bankruptcy process to
those who are in trouble and unable to recover on their own.

"Don't be ashamed about it," said Hoffman. "It happens. It's there to help you."